Intermediate Group I Paper 8 : COST ACCOUNTING (SYLLABUS 2016)

Transcription

1 1. (a) Multiple choice questions: (i) (ii) (iii) (iv) (v) (vi) Intermediate Group I Paper 8 : COST ACCOUNTING (SYLLABUS 2016) What is prime cost (A) Total direct cost only (B) Total Indirect production cost (C) Total non-production cost (D) Total Production cost. Objectives If the raw material price is affected by inflation, which of the following methods of valuing stocks will give the lowest gross profit? (A) FIFO (B) Simple average (C) LIFO (D) Replacement Cost If the activity based costing, cost are accumulated by (A) Cost pool (B) Cost Objectives (C) Cost benefit analysis (D) None of the above costing is must for Inter-firm comparison (A) Batch (B) Uniform (C) Marginal (D) None of the above Given that sales = ` 1,50,000, Variable cost = 60 %,Fixed cost = `40,000,the operating leverage will be (A) 2.2 (B) 2.5 (C) 3 (D) None of the above Selling price of a product is ` 6 per unit, variable cost ` 4 per unit fixed cost is ` 15,000.then Brake Even point in units will be: (A) 10,000 (B) 7,500 (C) 5,000 (D) 15,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1

2 (vii) AB Ltd. uses pre-determined overhead rate of ` 17 per labour hour. The actual labour hours are 5,950 and the actual overhead cost is ` 1,10,000.There is (A) ` 8,850 over absorption (B) ` 8,850 under absorption (C) ` 1,000 under absorption (D) `10,000 over absorption (viii) CAS16 Stands for (A) Pollution Control Cost (B) Direct Expenses (C) Depreciation & Amortisation (D) Joint Cost (ix) When overtime is required for meeting urgent orders, overtime premium should be (A) Charged to costing profit and loss A/c (B) Charged to Overhead Cost (C) Charged to respective Jobs (D) Ignored. (x) In which of the following incentive plan of payment of wages on time basis are not Guaranteed? (A) Halsey plan (B) Rawan plan (C) Taylor s differential piece rate system (D) Gantt s task and bonus system (xi) The Valuation of Closing stock according to Last in first out method of pricing is done at (A) The latest Prices (B) The earliest Prices (C) At average Prices (D) None of the above. (xii) + Profit = Sales (A) Cost of sales (B) Overhead cost (C) Prime Cost (D) Direct Cost (xiii) In job cost system, cost are accumulated (A) On a monthly basis (B) By specific job (C) By department or process (D) By Kind of material used (xiv) Difference between standard cost and actual cost is called as (A) Wastage (B) Loss (C) Variance DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 2

3 (D) Profit (xv) Budget are plans. (A) Control (B) Action (C) Profit (D) Finance (xvi) Standard time is 60 hours and guaranteed time rate is `50 per hour. Under Rowan Plan, what is the amount of wages, if job is completed in 48 hrs. (A) `2,480 (B) `2,680 (C) `2,880 (D) None of the above (xvii) Which method of costing Interior decoration (A) Process Costing (B) Multiple Costing (C) Operating Costing (D) Job Costing (xviii) Marginal Costing Technique follows the following basis of classification (A) Element Wise (B) Function Wise (C) Behavior wise (D) Identifiably Wise (xix) The difference between fixed cost & variable cost assumes significance in the preparation of the following budget. (A) Master Budget (B) Flexible Budget (C) Cash Budget (D) Capital Budget (xx) Depreciation is a example of- (A) Fixed Cost (B) Variable Cost (C) Semi Variable Cost (D) None of the above i(d) ii(c) iii(a) Iv(C) v(c) vi(b) vii(c) viii(c) ix(b) x(c) xi(a ) xii(a) xiii(b) xiv(c) xv(b) xvi(c) xvii(d) xviii(c) xix(b) xx(a) DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 3

4 (b) Match the following: Column 'A' Column 'B' 1 Non Integrated Accounts A CAS21 2 Apportionment of Overheads B CAS 16 3 Cost Accounting Standard on Treatment of C Reciprocal Method revenue in cost statement 4 Cost Accounting Standard on Quality Control D CAS 24 5 Zero Based Budgeting E Profitability rate 6 De-merit of a centralized purchase organization F Job Evaluation 7 Research and Development Costs G High Initial Cost 8 Point Rating H CAS18 9 Angle of incidence I Decision Package 10 Depreciation & Amortisation J Cost Ledger Accounts 1 (J) 2 (C) 3 (D) 4 (A) 5 (I) 6 (G) 7 (H) 8 (F) 9 (E) 10 (B) (c) State whether the following statements are true or false: (i) Fixed Costs vary with volume rather than time. (ii) ABC analysis is based on the unit price of materials. (iii) Loss = Brake even sales actual sales. (iv) Variable overhead vary with time. (v) Cash discounts are generally excluded completely from costs. (vi) Store ledger is maintained in the store department. (vii) As per the payment of Bonus Act, 1965 the maximum limit of bonus is 8.33% of gross earning. (viii) Departments that assist producing department indirectly are called service departments. (ix) Overhead are taken on estimated basis in financial accounts. (x) Cost control accounts are prepared on the basis of double entry system. i (F) ii (F) iii (T) iv (F) v (F) vi (T) vii (F) viii (T) ix (F) x (T) (d) Fill in the blanks (i) Breakeven point =contribution =. (ii) Re-order level = usage multiplied by lead time. (iii) In absorption costing cost is added to inventory. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 4

5 (iv) Penalties/damages paid to statutory authorities be form part of Direct Expenses. (v) The function of CASB is to assists the members in preparations of uniform under various statue. (vi) Salary paid to factory manager is an item of. (vii) Equivalent production of 1,000 units, 60% complete in all respects is. (viii) Excess of Actual cost over Standards Cost is treated as variance. (ix) In electricity companies, the cost unit is. (x) A cost which does not involve any cash outflow is called or. i (Fixed Cost) vi(factory Overhead) ii(maximum & Minimum) vii(600 units) iiii(fixed Cost) iv(shall Not) v(cost Statement) viii(unfavorable ix(kilowat) x(notional cost, variance) Imputed cost Material 2. (a) From the following particulars with the respect to a particulars item of material of XYZ manufacturing company calculate the best quantity to order: Ordering Quantities (Tons) Price per Ton (`) less than but less than 1, ,000 but less than 2, ,000 but less than 4, ,000 Above (b) The particulars relating to 1,200 kg. of a certain raw material purchased by a company during June, were as follows:- Lot prices quoted by supplier and accepted by the Company for placing the purchase order: Lot upto 1,000 `22 per kg. Between 1,000-1,500 `20 per kg. Between `18 per kg. Trade discount 20%. Additional charge for ` 10 per drum of 25 kgs. Credit allowed on return of ` 8 per drum. GST at 10% on raw material and 5% on drums. Total fright paid by the purchaser ` 240/- Insurance at 2.5% (on net invoice value) paid by the purchaser. Stores overhead applied at 5% on total purchase cost of material. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 5

6 The entire quantity was received and issued to production. The containers are returned in due course. Draw up a suitable statement to show:- (a) Total cost of material purchased and (b) Unit cost of material issued to production. 2. (a) Statement showing computation of total Inventory cost at different order size Particulars Ordering Quantities(tons) Material Cost i Purchasing cost ii No of orders iii Ordering Cost iv Average Cost v Inventory carrying cost per unit vi Inventory carrying cost (iv)x (v) vii Total Inventory Cost(i)+(iii)+(vi) For the above computations the best quantity order is 1000 tons. Note: Minimum ordering quantity assumed to be 200 tons; it may be any quantity below 250 tons but the decision will remain same. (b) Statement showing computation of total cost of material purchased and unit cost of material issued for production Particulars Unit Cost (`) Total Cost(`) Basic price of material less: Trade Discount Add: Drum Charges (1200/25*10) Add: GST 19,200x 10% = * 5% = Net Invoice Value Add: Insurance (21,624 x 2.5%) Add: Freight Paid Less: Credit for drums returned (1,200/25x8) Total Cost of Material Purchased Add: Stores Overhead (22,020.60x5%) Material cost issued for production DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 6

7 3. M/s Tubes Ltd. are the manufacturers of picture tubes for T.V. The following are the details of their operation during the year 2017: Average monthly market demand 2,000 Tubes Ordering Cost `150 per order Inventory carrying cost 20% per annum Cost of tubes `600 per tube Normal usage 150 tubes per week Minimum usage 60 tubes per w eek Maximum usage 220 tubes per week Lead time to supply 8 10 weeks Compute from the above: (i) Economic order quantity. If the supplier is willing to supply quarterly 1,950 units at a discount of 8% is it worth accepting? (ii) Re-order level (iii) Minimum level of stock (iv) Maximum level of stock A = Annual usage of tubes = Normal usage per weeks x 52 weeks =150 tubes x 52 weeks =7800 tubes O = Ordering cost per order = ` 110 per order C = Inventory carrying cost per unit per annum = 25%* ` 600 = ` 150per unit, per annum i. Economic Order Quantity E.O.Q = 2AO C = 2 7, 800 units = 125 tubes (Approx) If the supplier is willing to supply 1950 tubes at a discount of 8 % is it worth accepting? Total cost (when order size is 1950 tubes)=cost of 7,800units +ordering cost + carrying cost % 600 / = 7,800units x ` ( ) = `43, 05,600 + ` ` 1, 07,640 = ` 44, 13,848 Total Cost (when order size is 125 tubes) % 600 / = 7800 tubes x ` ( ) DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 7

8 = `46, 80,000 +` 9,360 + ` 7,500 = `46, 96,860 Since the total cost under quarterly supply of 1950 tubes with 8 % discount is lower than that when order size is 125 tubes, the offer should accepted. While accepting this offer capital blocked on order of 1,950 tubes per quarter has ignored. ii. Re-Order Level: = Maximum Consumption X Maximum lead time = 220 tubes X 10 weeks = 2,200 tubes. iii. Minimum Level of Stock: = Re-order level - Normal usage X Average re order period = 2,200 tubes 150 tubes X 9 weeks = 850 tubes. iv. Maximum Level of Stock = Re-order level + Re-order quantity Min Usage X Min re-order period =2,200 tubes +125 tubes 60 tubes X 8 weeks = 2,145tubes Labour 4. (a) Measurement of Employee Cost (with special items) Trial Balance as on (relevant extracts only) Particulars Amount (`) Particulars Materials consumed 1,05,00,000 Salaries 45,00,000 Special Subsidy received from Government towards Employee salary Employee Training Cost 2,00,000 Recoverable amount from Employee out of perquisites extended Perquisites to Employees 8,50,000 Contribution to Gratuity Fund 8,00,000 Lease rent for accommodation 6,00,000 provided to employees Festival Bonus 1,05,000 Unamortised amount of 90,000 Employee cost related to a discontinued operation Amount (`) 5,75,000 1,35,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 8

9 (b) The following information is given: Standard time allowed = 1 hour for 1 unit. Actual time taken by a worker = 32 hours for 40 units Standard Wage rate: ` 20 per unit or ` 20 per hour Calculate the earnings of the worker under (i) Taylor s Differential Piece Rate System (ii) Merrick Differential Piece Rate System (iii) Gantt Task Bonus Plan (High piece rate = `35/unit) (iv) Halsey Premium Plan (v) Rowan Plan (a) Particulars Amount (`) Salaries 45,00,000 Add Net Cost of Perquisites to Employees Cost of Perquisites (-) amount recoverable from employee = 8,50,000 (-)1,35,000 7,15,000 Add Lease rent paid for accommodation provided to employee 6,00,000 Add Festival Bonus 1,05,000 Add Contribution to Gratuity Fund 8,00,000 Less Special subsidy received from Government towards employee salary (5,75,000) Employee Cost 61,45,000 Note: (i) Recoverable amount from employee is excluded from the cost of perquisites. (ii) Employee training cost is not an employee cost. It is to be treated as an Overhead, hence, not included. (iii) Special subsidy received is to be excluded, as it reduces the cost of the employer (iv) Unamortized amount of employee cost related to a discontinued operation is not an includible item of cost. (b) Standard hours= 40; Actual Hours taken= 32; Savings= 8 Hours Statement showing total earning in different plan (`) Taylor s Differential Merrick Gantt Task Halsey Premium Rowan Plan Piece Rate System Differential Piece Bonus Plan Plan rate System 120%X40X20 = %X40X20 = 40X35 = (32X20)+(.5X8X20) (32X20)+[(8/40)X(32X20] = = 720 = = 768 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 9

10 5. The Employees in a factory are paid wages at the rate of `14 per hour for an eight hour shift. Each employee produces 5 unit per hour the overhead `20 direct labour hour. Employees and the management are considering the following piece rate wage proposal: Per Unit (`) Upto 45 units per day of 8 hour 2.60 From 46 units to 50 Units 3.20 From 51 units to 55 units 3.30 From 56 units to 60 units 3.40 Above 60 units 3.50 The working hours are restricted to 8 hour per day. Overhead rate does not change with increased production. Prepare a statement indicating advantages to employees as well as to management to production levels of 40,50,55,60 & 65 units. Time rate for 5 unit =Wage + Overhead= `14+`20 =`34/hr Cost of production per unit =34/5 = `6.80 Statement showing the saving to employees Units(A) Time rate Piece rate per Piece rate wage Savings(E)=(D-B)( `) wage(b) (`) unit(c)( `) (D)=(BXC))( `) Statement Showing the saving to the Management Units Hours Time Time rate basis of Piece Piece Rate Total (G)= Savings to the (A) (B) rate total wages Rate Cost Basis (E+F)(`) Management Cost (inclusive overhead) (E)(`) Overhead (H)=(D-G) (`) (C) (`) (D)=(BXC) (`) (F) (`) DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 10

11 Direct Expenses 6. The following information relates to the activities of a production department of factory for a certain period. (`) Material used 46,800 Direct Wages 39,000 Labour hours 15,600 Hours of Machinery -Operation 26,000 Overhead chargeable to the Dept 32,760 On one order carried out in the department during the period the relevant data were:- Material used(`) 7,800 Direct Wages(`) 6,435 Labour hours worked(hours) 2,145 Machine Hours 1,560 Calculate the overheads chargeable to the job by four commonly used methods. The four commonly used methods of absorbing or recovering overheads are as follows: 1. % of overhead on material = (32,760/46,800)X100 = 70.00% 2. % of overhead on direct wages = (327,60/39,000)X100 = 84% 3. Overhead rate per labour hour = 32,760/15,600 = ` Machine hour rate method = 32,760/26,000 = `1.26 The overheads chargeable to job under the above methods is as follows: 1. Material = 7,800X70% = `5, Wages = 6,435X84% =`5, Labour hour rate = 2,145 X 2.10 = ` 4, Machine hour rate = 1,560 X 1.26 = ` 1, For a production department of a manufacturing company you are required to: (a) prepare a fixed budget of overhead; (b) prepare a flexible budget of overhead, at 70% and 110% of budget volume; (C)Calculate a departmental hourly rate of overhead absorption as per (a) and (b) above The budget level of activity of the department is 5,000 hours per hours per period and the study of the various items of expenditure reveals the following: DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 11

12 ` ` Per hour Indirect wages 0.48 Repairs upto 2,000 hours 120 for each additional 500 hours upto a total of 4,000 hours 42 Additional from 4,001 to 5,000 hours 72 Additional above 5,000 hours 84 Rent and Rates 420 Power Upto 3,600 hours 0.3 for hours above 3, Consumable supplies Supervision Upto 2,500 hours 480 Additional for each extra 500 hours above 2,500 and upto 5,000 hours 120 Additional above 5,000 hours 180 Depreciation upto 5,000 hours 780 Additional for each extra 500 hours 204 Cleaning upto 4,000 hours 72 Additional for each extra 500 hours 24 Heat and lighting from 2,100 hours to 3,500 hours 144 from 3,501 hours to 5,000 hours 180 above 5,000 hours 210 Particulars (3,500) 70% (5,000)100% (5,500)110% Indirect Wages (48/hrs.) 1,680 2,400 2,640 Repairs Rent & Rates Power 1,050 1,416 1,536 Consumable Supplies Supervision ,260 Depreciation Cleaning Heating & Lighting Total 6,120 7,948 9,174 OH rate per hour DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 12

13 1. If the under absorbed OH is 10% or more of actual OH incurred supplementary OH rate is applied. (or) 2. If the amount is considerable, supplementary OH rate applied otherwise we may follow, transferring to P&L or Carry forward to next year. Working Notes: Hours 3,500 5,000 5,500 Repairs 120+(3*42)= (4X42)+72= (4X42)+72+84=444 Power (3,500x.30)=1,050 (3,600X.3)+(1,400X.24)=1,416 (3,600X.3)+(1,900X.24)=1536 Supervision 480+(2X120)= (4*120)= (5X120)+180=1, X ltd engineering Co. having 25 different types of automatic machines, furnishes you the following data for in respect of machine P 1. Cost of the machine ` 60,000 Life 12 years scrap value is nil 2. Overhead expenses are: Factory Rent ` 95,000 p.a. Heating and lighting ` 55,000 Supervision `2,00,000 p.a. Reserve equipment of Machinery P ` 5,000 p.a. Area of the factory 90,000 sq. ft. Area occupies 3,000 sq. ft. 3. Wages of operator is 32 per day of 8 hours including as fringe benefits. He attends to one machine when it is under set up and two machines while under operation 4. Estimated production hours 3,600 p.a. Estimated set up time 400 hrs p.a. Power 0.5 per hour Prepare a schedule of comprehensive machine hour rate and find the cost of the following jobs: Job 1310 Job 1410 Set up time (Hrs) Operation Time(Hrs) DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 13

14 Computation of machine hour rate when machine is in operation Particulars Amount (`) Standing Charges Rent 95,000*4.5/90 4,750 Heating & lighting 55,000*4.5/ Supervision 2,00,000*4.5/90 10,000 Reserve equipment 5,000 22,500 Cost per hour 22,500/4, Machine Expenses: Depreciation [60,000/(10X3600)=1.67 Wages 3[32/8X1/2]=2.00 Power = Machine Hour Rate 9.8 Computation of machine hour rate when machine is under set up Particulars Amount (`) Standing Charges Rent 95,000*4.5/90 4,750 Heating & lighting 55,000*4.5/ Supervision 2,00,000*4.5/90 10,000 Reserve equipment 5,000 22,500 Cost per hour 22,500/4, Machine Expenses: Depreciation [60,000/(10X3600)=1.67 Wages [32/8] =4.00 Power 5.67 Machine Hour Rate 11.3 Computation of cost of the jobs Particulars Job 1310 (`) Job 1410 (`) Setup Cost Job 1310: 70X11.30 Job 1410: 130X Operation Cost Job 1310: 130X9.8 Job 1410: 180X9.8 1,274 1,764 Total Cost of the Job 2,065 3,233 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 14

15 9. (a) List of Scope of CAS-5 (b) Write a short Note on CAS-22 (a) Scope of CAS -5 This standard should be applied for calculation of cost of transportation required under any statute or regulations or for any other purpose. For example, this standard can be used for: (1) Determination of average transportation cost for claiming the deduction for arriving at the assessable value of excisable goods. (2) Insurance claim valuation. (3) Working out claim for freight subsidy under Fertilizer Industry Coordination Committee. (4) Administered price mechanism of freight cost element. (5) Determination of inward freight costs included or to be included in the cost of purchases attributable to the acquisition. (6) Computation of freight included in the value of inventory for accounting on inventory or valuation of stock hypothecated with Banks / Financial Institution...etc. (b) CAS 22: Cost Accounting Standard on Manufacturing Cost: This standard deals with the principles and methods of determining the Manufacturing Cost of excisable goods. This standard deals with the principles and methods of classification, measurement and assignment for determination of the Manufacturing Cost of excisable goods and the presentation and disclosure in cost statements. Objective The objective of this standard is to bring uniformity and consistency in the principles and methods of determining the Manufacturing Cost of excisable goods. Scope This standard should be applied to cost statements which require classification, measurement, assignment, presentation and disclosure of Manufacturing Cost of excisable goods. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 15

16 Cost statements/reconciliation/integration/item excluded from cost and normal and abnormal item 10. The Profit & loss A/c of ABC ltd for the year ended 31st March, 2018 was as follows Profit & Loss A/c For the year ended 31 st March, 2018 Particulars Amount(`) Particulars Amount(`) To Materials 7,20,000 By ,40,000 To Wages 5,40,000 By Work in Progress To Direct Expenses 3,60,000 Material 45,000 To Gross Profit 1,80,000 Wages 27,000 Direct Expenses 18,000 By Closing Stock 2,70,000 18,00,000 18,00,000 To Administration Expenses 90,000 By Gross Profit 1,80,000 To Net Profit 99,000 By Dividend Received 9,000 1,89,000 1,89,000 As per the Cost records, the direct expenses have been estimated at a cost `30 per unit and administration expenses at `15 per unit. During the year production was 9,000 units and sales were `12,00,0000. Prepare a statement of Costing Profit & Loss A/C and Reconcile the profit with financial profit. Statement of Profit as per Cost Accounts Particulars ` 1 Direct Material 7,20,000 2 Direct Material 5,40,000 3 Prime Cost(1+2) 12,60,000 4 Factory Overhead (9,000 Units X 30) 2,70,000 5 Gross factory Cost (3+4) 15,30,000 6 Work In progress( 90,000 7 Factory Cost(5-6) 14,40,000 8 Office Overhead(17X9,000) 1,35,000 9 Cost of Production (9,000 Units) 15,75, Closing Stock of 1,000 units(working Note) 2,70, Cost of goods sold(9-10) 13,05, Profit(Balance Figure) 1,35, Sales 14,40,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 16

17 Calculation of Closing stock Sales 14,40,000 less: Gross Profit 1,80,000 Cost of sales 12,60,000 Add: Closing Stock 2,70,000 Add: Work -in-progress 90,000 Cost of Produced 16,20,000 Cost per unit = 16,20,000 9,000 = ` 180 Unit of closing stock= 2,70,000 =1,500 units 1,500 Profit as per Costing Profit And loss Account 1,35,000 Add: Over recovery Adm. overhead 45,000 Add: Dividend Income 9,000 1,89,000 Less: Under recovery factory overhead 90,000 Profit as per Financial Account 99, Journalize the following transactions assuming that cost and financial accounts are integrated. Particulars ` Raw material purchased 45,000 Direct materials issued to production 33,000 Wages paid (30% indirect) 36,000 Wages charged to production 25,200 Manufacturing expenses incurred 20,000 Manufacturing overhead charged to Production 18,500 Selling and distribution cost 4,000 Finished products (at cost) 50,000 Sales 60,000 Closing stock Nil Receipts from debtors 23,800 Payments to creditors 14,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 17

18 ` ` Material Control A/c Dr 45,000 To, Creditors A/c 45,000 Work In Progress Control A/c Dr 33,000 To, Material Control A/c 33,000 Wages Control A/c Dr 36,000 To, Cash A/c 36,000 Factory Overheads Control A/c Dr 10,800 To, Wages Control A/c 10,800 Work-in-Progress Control A/c Dr 25,200 To, Wages Control A/c 25,200 Factory Overhead Control A/c Dr 20,000 To, Cash A/c 20,000 Work-in-Progress Control A/c Dr 18,500 To, Factory overhead Control A/c 18,500 S & D O.H. Control A/c Dr 4,000 To, Cash A/c 4,000 Cost of Sales A/c Dr 4,000 To, Selling & Distribution Overhead Control A/c 4,000 Finished Goods Control A/c Dr 50,000 To, Work-in-progress control A/c 50,000 Debtors A/c Dr 60,000 To, Profit & Loss A/c 60,000 Cash A/c Dr 23,800 To, Debtors A/c 23,800 Creditors A/c Dr 14,000 To, Cash A/c 14,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 18

19 Job Costing 13. In a factory following the Job Costing Method, an abstract from the work in process as at 31 st March, was prepared as under. Job No Material Direct Labour Factory Overhead Applied hrs hrs hrs ,480 1,775 1,420 Materials used in April were as follows: Material requisitions No. Job no. Cost A summary of Labour Hours deployed during April is as follows Job No Shop A Shop B Indirect Labour Waiting for material Machine breakdown 10 5 Idle time 5 6 Overtime premium A shop credit slip was issued in October, that material issued under requisition No.44 was returned back to stores as being not suitable. A material transfer note issued in October indicated that material issued under requisition No.45 for Job 222 was directed to Job 23. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 19

20 The hourly rate in shop X per labour hour is `3 while at shop Y it is` 2 per hour. The factory overhead is applied at the same rate as in April; Jobs 215, 222 and 230 were completed in October. You are asked to compute the factory cost of the completed jobs. It is practice of the management to put a 10% on the factory cost to cover administration and selling overheads and invoice the job to the customer on a total cost plus 20% basis what would be the invoice price of these three jobs? Calculation of Selling price of the Job Job No ` ` ` Material Labour Overhead Total(A) Cost in April Material Labour (25x3)+(25X2) 125 (90X3)+(30X2) 330 (75X3)+(10X2) 245 Overheads (80%) Total(B) Total Factory Cost(A+B) Add: Admin Overheads-10% Profit Selling Price The data pertaining to Heavy Engineering Ltd. using are as follows at the end of Direct material `8,10,000; Direct wages `6,75,000; Selling and distribution overhead `4,72,500; Administrative overhead `3,78,000 Factory overhead `4,05,000 and Profit `5,48,100. (a) Prepare a cost sheet showing all the details. (b) For , the factory has received a work order. It is estimated that the direct materials would be `10,80,000 and direct labour cost `6,75,000. What would be the price of work order if the factory intends to earn the same rate of profit on sales, assuming that the selling and distribution overhead has gone up by 15%? The factory recovers factory overhead as a percentage of direct wages and administrative and selling and DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 20

21 distribution overheads as a percentage of works cost, based on the cost rates prevalent in the previous year. Statement of Cost & Profit Particulars ` Direct Material 8,10,000 Direct Wages 6,75,000 Prime cost 14,85,000 Factory Overheads (60%) 4,05,000 Works Cost 18,90,000 Administration Overheads(20% works cost) 3,78,000 Cost of Production 22,68,000 Selling & Distribution Overheads(25% works cost) 4,72,500 Cost of Sales 27,40,500 Profit(1/5 of Cost) 5,48,100 Sales 32,88,600 Estimated price of work order Particulars ` Direct Material 10,80,000 Direct Wages 6,75,000 Prime cost 17,55,000 Factory Overheads (60%) 4,05,000 Works Cost 21,60,000 Administration Overheads(20% works cost) 4,32,000 Cost of Production 25,92,000 Selling & Distribution Overheads(40% works cost) 8,64,000 Cost of Sales 34,56,000 Profit(1/5 of Cost) 6,91,200 Sales 41,47,200 Process Costing 15. CG Ltd. is engaged in process Engineering Industry. During the month of April, 2015, 3,000 units were introduced in Process X. The normal loss was estimated at 5% of input. At the end of the month 2,100 units had been produced and transferred to process Y. 690 units incomplete and 210 units after passing through fully the entire process had to be scrapped. The incomplete units had reached the following stage of completion. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 21

22 Material Labour Overhead 75% completed 50% completed 50% completed Following are the further information on the Process X Cost of the 3,500 units `87,000 Additional Direct Material `21,600 Direct Labour `50,100 Direct Overhead `25,050 Units scrapped realized 15 each. Prepare Statement of Equivalent Production. Statement of Cost, Statement of Evaluation and Process X Account. Statement of Equivalent Production Input Output Unit Material Labour Overhead % Unit % Unit % Unit 3000 Normal Loss 150 Closing Stock Finished Units Abnormal Loss Statement of Cost Particulars Cost (`) Equivalent Units Cost per nit(`) Material (87,000+21,600)-1,500 1,07, Labour 50, Overhead 25, Value of Abnormal Loss Element Units Cost Per Unit(`) Total Cost(`) Material , Labour ,200 Overhead , Value of Closing Stock Element Units Cost Per Unit(`) Total Cost(`) Material , DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 22

23 Labour , Overhead , , Process X Account Particulars Units (`) Particulars Units (`) To, Material introduced 3,000 87,000 By, Normal Loss 150 1,500 To, Additional Material 21,600 By, Abnormal Loss 60 4, To, Labour 50,100 By, Closing Stock , To, Overhead 25,050 By, Transfer to Next per unit 2,100 1,45, , , ,83,750 Joint Product and By Product 16. In the course of manufacture of the main product P by products A and B also emerge. The joint expenses of manufacture amount to `1,19,550. All the three products are processed further after separation and sold as per details given below: Main Product By Product A X Y Sales 1,35,000 90,000 60,000 Cost incurred After separation 9,000 7,500 6,000 Profit as % on sales Total fixed selling expenses are 10% of total cost of sales which are apportioned to the three products in the ratio of 20 : 40 : 40. (a) Prepare a statement showing the apportionment of joint costs to the main product and the two by products. (b) If the by-product X is not subjected to further processing and is sold the point of separation for which there is a market, at `93,600 without incurring any selling expenses. Would you advise its disposal at this stage. Show the workings. (a) Statement showing computation of share of joint expenses Main Product A By Product X By Product Y Total Particulars ` ` ` ` 1 Sales 1,35,000 90,000 60,000 2,85,000 2 Profit 33,750 18,000 9,000 60,750 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 23

24 3 Cost of Sales (1-2) 1,01,250 72,000 51,000 2,24,250 4 Selling Expenses 4,485 8,970 8,970 22,425 5 Manufacturing Cost(3-4) 96,765 63,030 42,030 2,01,825 6 Separate Costs 9,000 7, ,500 7 Share of Joint Expenses (5-7) 87,765 55,530 36, ,325 ` Sales at split off(x) = 93,600 (-)Joint Cost (X) = 55,530 = 38,070 (b) It is better to sell By-Product X at split off point because it gives more profit ` 38,070 against profit after processing `18,000. Operating Costing 17. Union Transport Company supplies the following details in respect of a truck of 8 tonne capacity Cost of Truck `1,80,000 Estimated Life 10 years Diesel, Oil, Grease `20 per trip each way Repairs and maintenance `1,130p.m Driver's wages `700 p.m Cleaner's wages `450 p.m Insurance `9,600 per year Tax `4,800 per year General supervision charges `6,000 per year The truck carries goods to and from the city covering a distance of 60 kms. each way. On outward trip freight is available to the extent of full capacity and on return 20% of capacity. Assuming that the truck runs on an average 25 days a month, work out: (a) Operating cost tonne-km. (b) Rate for tonne per trip that the company should charge if a profit of 50% on freight is to be earned. Particulars Amount(`) Repairs and Maintenance 1,130 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 24

25 Driver's wages 700 Cleaner's wages 450 Insurance 800 Tax 400 General supervision charges 500 Depreciation 1,500 Diesel, Oil, Grease 1,000 Total Cost per Month(A) 6,480 Tonne Kms =25[(60x8)+(20/100x60x8)] (B) 14,400 Cost Per Tonne km (C)=(A/B) %Profit on freight (100 % on cost)(d) 0.45 Rate per Tonne km A Primary School has a total students consisting of 5 section with 30 students per section. The school plans for outing around the city during the weekend. A private transport operator has come forward to hire the buses for taking the students. Each bus will have a maximum capacity of 50 (excluding 2seats reserved for teachers accompanying the students).the school will employ two teachers for each bus, paying them an allowance of `150 per teacher. The operator will hire out the required number of buses. The following are the other cost estimates: Break Fast `12 per Student Lunch `24 per Student Tea `5 per Student Entrance fee at zoo `5 per Student Rent per bus 2,600 Special permit fees `200 per bus Block entrance fees at planetarium `600 Prizes to student for games `400 No cost are incurred in respect of accompanying teachers (except allowance of 100 per teacher) You are required to prepare a statement showing total cost also average cost per student for the levels of 30,60,90,120,150 students. Statement of Variable Cost Student /student DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 25

26 Entrance 5/student Total Statement of Semi Variable cost Student Rent of Bus 2,600 5,200 7,800 10,400 13,000 Permit Fees ,000 Allowance to teacher Total 3,100 6,200 9,000 12,400 15,200 Statement of Fixed Cost Student Block entrance fees at planetarium Prizes to student for games Total 1,000 1,000 1,000 1,000 1,000 Statement of cost per Student Student(A) Total Variable Cost 1,380 2,760 4,140 5,520 6,900 Total Semi Variable Cost 3,100 6,200 9,000 12,400 15,200 Total Fixed Cost 1,000 1,000 1,000 1,000 1,000 Total Cost(B) 5,480 9,960 14,140 18,920 23,100 Average cost (A/B) Contract Costing 19. XYZ limited undertook a contract for 6,25,000 on 1st July, On 30th June 2017 when the accounts were closed, the following details about the contract were gathered Particulars ` Material Purchased 1,25,000 Wages paid 56,250 General expenses 15,000 Plant purchases 25,000 Materials on hand ,250 Wages accrued ,250 work certified 2,50,000 Cash received 1,875,00 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 26

27 Depreciation of Plant 5,000 Work uncertified 18,750 The above contract contained an escalator clause which read as follows: In the event of prices of materials and rates of wages increase by more than 5% the contract price would be increased accordingly by 25% of the rise in the cost of materials and wages beyond 5% in each case. It was found that since the date of signing the agreement the prices of materials and wage rates increased by 25% the value of the work certify does not take into account the effect of the above clause. Prepare the contract account. Working should form part of the answer. Cost of material & wages incurred = ` (1,25,000+56,250+6,250-31,250) = `1,56,250 Cost of material &wages before increase in prices = ` (1,56,250x100/125)=1,25,000 Increase in contract price = 25/100[1,56,250 - (1,25,000x105/100)] = `6,250 Dr. Contract Account Cr. Particulars Amount(`) Particulars Amount(`) To, Material Purchased A/c 1,25,000 By, Material on hand 31,250 To, Wages A/c 62,500 Work certified 2,56,250 To, General Expenses A/c 15,000 Work uncertified 18,750 To, Depreciation on Plant 5,000 2,75,000 To, Balance (Notional profit)c/d 98,750 3,06,250 3,06,250 To Profit & loss A/c By Balance b/d 98,750 1/3(98,750x1,87,500/2,56,250) 24,085 To Reserve c/d 74,665 98,750 98, The following is the Trial Balance of PN Construction Company, engaged on the execution of contract No.47, for the year ended 31st December, 2018 Contractee Account (`) (`) Amount Received 3,60,000 Building 1,92,000 Creditor 86,400 Bank Balance 42,000 Capital Account 6,00,000 Materials 2,40,000 Wages 2,16,000 Expenses 56,400 Plant 3,00,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 27

28 The work on Contract No.47 was commenced on 1st January, 2017 materials costing `2,04,000 were sent to the site of the contract but those of 7,200 were destroyed in an accident. Wages of ` 2,16,000 were paid during the year. Plant with a cost of 2.4 lakhs was used from 1st January to 30th September and was then returned to the stores. Materials of the cost of `4,800 were at site on 31st December, The contract was for `7,20,000 and the contractee pays 75% of the work certified. Work certified was 80% of the total contract work at the end of Uncertified work was estimated at ` 15,000 on 31st December, 2015.Expenses are charged to the contract at 25% of wages. Plant is to be depreciated at 10% for the entire year. Dr. Contract Account Cr. Particulars Amount(`) Particulars Amount(`) To, Material A/c 2,04,000 By Costing P& L A/c 7,200 To, Wages A/c 2,16,000 By Material Return 4,800 To, Depreciation By WIP A/c [3,00,000x9/12x10/100] Work Certified 5,76,000 [60,00x3/12x10/100] 24,000 Work uncertified 18,000 To, Expenses 54,000 To, P& L A/c 54,000 To, Reserve A/c 54,000 6,06,000 6,06,000 Dr. Profit & Loss Account Cr. Particulars Amount(`) Particulars Amount(`) To, Contract A/c 7,200 By, Contract A/c 54,000 To, Depreciation on Plant Profit [2,40,000x10%x3/12] 6,000 To, Expenses(56,400-54,000) 2,400 to, Net Profit 38,400 54,000 54,000 Balance Sheet as on31st Dec, 2017 Liabilities Amount(`) Assets Amount(`) Capital 6,00,000 Building 1,92,000 P& L 38,400 Plant 2,70,000 Creditors WIP 5,94,000 (-)Cash Received 3,60,000 2,34,000 (-)Reserve 54,000 1,80,000 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 28

29 Marginal Costing Material 40,800 Bank 42,000 7,24,800 7,24, A company manufactures a product currently utilizing 80% capacity with a turnover of 40,000 units at a selling price of `25 per unit. The variable cost of the product is ` 17.5 per unit fixed cost amounts `1,87,500 Up to 80% level of output and there will be an additional cost of supervision amounting to ` 25,000 beyond that level. Calculate: (i) Activity Level (%) at breakeven point (ii) Number of units to be sold to earn a net income of 10% of sales. (iii) Activity Level (%) to earn a profit of `1,87,500. Capacity utilized 80 % Turnover at 80% capacity = 40,000 units. Turnover at 100% capacity = 50,000 units. Fixed cost `1,87,500, Fixed cost at more than `2,12,500 Selling price = ` 25 Contribution per unit = `7.50 PVR = 7.5/25X100 = 30% (i) BEP = Fixedcost Contributio / unit = 1,87, Activity level in % = 25,000/50,000 = 50% (ii) (a) If fixed cost is `1,87,500 Let desired sales be X units Desired sales = = 25,000 unit. Fixedcost +DesiredProfit PVR 1,87, x X =.30 X = `9,37,500 Number of units = 9,37,500/25 = 37,500 units As activity level is less than 40,000 units, hence additional supervision cost will not be applicable. (b) If fixed cost is `1,87,500 Let desired sales be X units Desired sales = Fixedcost +DesiredProfit PVR DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 29

30 2,12, x X =.30 X = `10,62,500 Number of units = 10,62,500/25 = 42,500 (iii) Number of units to be sold to earn a profit of `1,87,500 1,87,500 +1,87,500 Number of units = = 50,000 units 7.5 Activity level = 100% 22. The operating statement of a company is as follows: ` ` each) 18,75,000 Cost: Variable Material 3,00,000 Labour 4,00,000 Overheads 2,00,000 9,00,000 4,00,000 13,00,000 5,75,000 The capacity of the plant is 1.25 lakh units. A customer from U.S.A is desirous of buying 25,000 units at a net price of per unit. Advice the producer whether or not offer should be accepted. Will your advice be different, if the customer is local one. Statement showing computation of profit before after accepting the order (in `) Particulars Present Position(Before accepting )1,00,000 Order Value 25,000 Total (After accepting) 1,25,000 1 Sales 18,75,000 3,12,500 21,87,500 2 Variable Cost Material 3,00,000 75,000 3,75,000 Labour 4,00,000 1,00,000 5,00,000 Overheads 2,00,000 50,000 2,50,000 9,00,000 2,25,000 11,25,000 3 Contribution(1-2) 9,75,000 87,500 10,62,500 4 Fixed Cost 4,00, ,00,000 5 Profit 5,75,000 87,500 6,62,500 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 30

31 23. Present the following information to show to management (i) The marginal product cost and contribution p.u. (ii) The total contribution and profits resulting from each of the following sales mix result Particulars Product Per Unit (`) Direct Material X 20 Direct Material Y 18 Direct Wages X 6 Direct Wages Y 4 Fixed Expenses - `1,600 & (Variable expenses are allotted to product at 100% Direct Wages) Sales Price X- 40 Sales Price Y- 30 Sales Mixtures: (a) 100 units of product X and 200 of Y (b) 150 units of product X and 150 of Y (c) 150 units of product X and 150 of Y Statement Marginal product Cost & Contribution p.u. Sr. No. Selling Price X Y 1 Selling Price Variable Cost Direct Material Direct Wages 6 4 Variable Expenses Contribution (1-2) 8 4 Statement Showing Sales Mixture Sr. Sales Mix(a) Sales Mix(b) Sales Mix(c) No Particulars X Y Total X Y Total X Y Total 1 No of units Contribution per unit Total Contribution (1X2) , , ,000 4 Fixed Cost 1,600 1,600 1,600 5 Profit Nil DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 31

32 24. The following results of a company for the last two years are as follows: Year Sales(`) Profit(`) ,00,000 30, ,80,000 50,000 You are required to calculate: (i) P/V Ratio (ii) B.E.P (iii) The Sales required to earn a profit of 50,000 (iv) Profit when sales are 8,00,000 (v) Margin of safety at a profit of ` 50,000 (vi) Variable costs of two periods. (i) P/V ratio = (Change in profit/change in sales) 100 = (20,000/80,000) 100 = 25% (ii) Fixed Cost = (Sales X P/V ratio)-profit = (3,00,000 25%)-30,000 = `45,000 Break Even Sales = Fixed Cost/PV ratio = `45,000/25% = `1,80,000 (iii) Sales required to earn a profit of `50,000 = Fixedcost +Desiredprofit P / VRatio = `9,20,000 (iv) Profit at sales `5,00,000 = (Sales P/V ratio)-fixed Cost = 2,00,000-1,80,000 = `20,000 (v) Margin of Safety at profit of 50,000 = profit/pv ratio = 50,000/25% = `2,00,000 (vi) Variable cost for 2017 = 3,00,000 75%) = `2,25,000 Variable cost for 2018=(3,80,000 75%) = `2,85, Hotel Seven Star has annual fixed costs applicable to rooms of ` 18,00,000 for a rent a 360 rooms hotel with average daily room rates 480 and average variable costs ` 72 for each room rented. The Hotel operates 365 days per year. It is subject to an income tax rate of 30%.You are required to: (i) Calculate the number of rooms the Hotel must rent to earn a net income after taxes of `12,00,000 (ii) Compute the break-even point in terms of rooms rented. DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 32

33 (i) Suppose Income before tax 100 Less :Income Tax 30 Income after Tax 70 Income before tax corresponding to 12,00,000 income after tax=(100/70) 12,00,000 = `17,14,286 Fixed Cost per annum Add: Income before Tax Total Desired Contribution `18,00,000 `17,14,286 `35,14,286 Daily Contribution per room day = (480-72) = `402 Total Sales Value = Total desired contribution/pv ratio = 35,14,286/(402/480)= `29,43,215 No of rooms days = 29,43,215/480 = 6,136 (Approx) The Hotel must rent out rooms per day (6,136/365days) to derive a total contribution of `35,14,571, this will give the Hotel after tax profit of ` 12,00,000. (ii) B.E Sales = Fixed Cost/Daily Contribution per room =18,00,000/402 = `4,478(approx) 26. The following Miscellaneous information regarding the operations of 2017 has been available from the Record of GS Corporation. ` Sales 1,20,000 Direct Materials used 48,000 Direct Labour 18,000 Fixed Manufacturing Overhead 24,000 Fixed Selling and Administration Expenses 12,000 Gross Profit 24,000 Net Loss 6,000 There are no beginning or ending inventories. You are required to Calculate: (i) Variable Selling and Administration Expenses (ii) Factory Cost of Goods Sold (iii) Variable Factory Overhead (iv) Contribution of Margin in rupees (v) Break-Even Point in rupee sales DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 33

34 (i) Net Loss = Gross profit - Fixed Selling and Administration Variable Selling & Administration Expenses Or,(6,000) = 24,000-12,000- Variable Selling & Administration Expenses Variable Selling & Administration Expenses = ` 18,000 (ii) Cost of goods sold = Sales - Gross profit =1,20,000 24,000 = ` 96,000 (iii) Cost of Goods Sold = Direct Material Used + Direct Labour + Fixed Manufacturing Overhead + Variable Manufacturing Overhead Or,96,000 = 48,000+18,000+24,000+Variable Manufacturing Overhead Variable Manufacturing Overhead = ` 6,000 (iv) Contribution = Sales-Variable Costs =1,20,000-(48,000+18,000+18,000+6,000) = ` 30,000 (v) BEP(in ` ) = Fixed cost/pv ratio = 24, , = ` 1,44,000 30,000 /1,20,000 Standard Costing & Variance Analysis 27. The standard set for material consumption was 100 ` 3.25 per unit. In a cost period: Opening stock was 100 ` 3.25 per unit. Purchases made 500 ` 3.15 per unit. Consumption 110units Calculate: a)usage Variance b)price Variance 1) When variance is calculated at point of purchase 2) When variance is calculated at point of issue on FIFO basis 3) When variance is calculated at point of issue on LIFO a) Computation of Material Usage Variance Material Usage Variance = SQSP AQSP = SP (SQ AQ) = 3.25( ) = `32.50 (A) DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 34

35 b) Computation of Price variance: 1) When Variance is calculated at the point of purchase: Price variance = AQSP AQAP = (110 x 3.25) (110 x 3.15) = ` 11 (F) 2) When variance is calculated at the point of issue on FIFO basis Price variance = AQSP AQAP = (110 x3.25) ([100 x 3.25]+[10 x 3.15]) = `1 (F) 3) When variance is calculated at the point of issue on LIFO basis Price variance = AQSP AQAP = (110 x 3.25) (110 x 3.15) = = `11 (F) 28. The Standard labour complement and the actual complement engaged in a week for a job are as under: Particulars Skilled workers Semi Skilled Worker Unskilled workers a) Standard no. of workers in the group b) Standard wage rate per hour c) Actual no. of workers employed in the group during the week d)actual wage rate per hour During the 40 hour working week the group produced 3,600 standard labour hours of work. Calculate 1)Labour Efficiency Variance 2) Mix Variance 3)Efficiency Variance 4)Labour Rate Variance 5)Labour Cost Variance Analysis of Given Data Standard Data Actual Data Hours Rate Value Hours Rate Value Skilled 64X40=2, ,360 56X40=2, ,920 Semi Skilled 24X40= ,840 36X40= ,640 Unskilled 12X40= X40= ,280 4,000 20,160 4,000 27,840 DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 35

36 Computation of Required Values SRSH(1)( `) SRESH(2)( `) SRAH(3)( `) ARAH(4)( `) Skilled 6X2,304=13,824 15,360 2,240X6=13,440 17,920 Semi Skilled 4X864=3,456 3,840 1,440X4=5,760 8,640 Un Skilled 2X432= X2=640 1,280 18,144 20,160 19,840 27,840 SH = (SH for that worker/sh for all the worker) AQ for that worker For Skilled worker)=(2,560/4,000) 3,600=2,304 For Semi Skilled=(960/4,000) 3.600=864 For Unskilled=(480/4,000) 3,600=432 Computation of Labour Variances: 1. Labour sub Efficiency Variance=(1)-(2)=(18,144-20,160)=2,016(A) 2. Labour Mix Variance=(2)-(3)=(20,160-19,840)=320(F) 3. Labour Efficiency Variance=(1)-(3)=(18,144-19,840)=1,696(A) 4. Labour Rate Variance=(3)-(4)=(19,840-27,840)=8,000(A) 5. Labour Cost Variance=(1)-(4)=18,144-27,840=9,696(A) Budget & Budgetary Control 29. The monthly budget for manufacturing overhead of a concern for two levels of activity were as follows: Capacity 50% 90% Budgeted Production(units) 1,000 1,800 Wages 1,000 1,800 Consumable Stores 750 1,350 Maintenance 900 1,500 Power and Fuel 1,600 2,000 Depreciation 5,000 5,000 Insurance 2,000 2,000 You are required to: (i) Indicate which of the items are fixed, variable and semi variable; (ii) Find the total cost, both fixed and variable per unit of output at 60%, 80% and 100% capacity (i) Fixed--Depreciation, Insurance Variable Wages, Consumable stores Semi- Variable Maintenance, Power and Fuel DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 36